We reported in edition 157 of BC Disease News that Slater & Gordon (S&G) planned to sue Quindell, now known as Watchstone Group, for the £637m purchase of Quindell’s Professional Services Division. Subsequent to this purchase, Quindell came under investigation by the UK’s Serious Fraud Office for its historic business and accounting practices causing S&G to suffer a reported £493m loss and a 25% reduction in share price.
S&G is seeking £53m compensation from Watchstone Group under a warranty attached to the Share Purchase Agreement for non-performance or under-performance of the sale. S&G has previously announced to the Australian Stock Exchange (ASX), that £50million of the purchase price paid to Watchstone Group Plc will remain in escrow (a bond kept in the custody of a third party and taking effect only when a specified condition has been fulfilled) until the notified claim is resolved. One criteria required by the Share Purchase Agreement, was that S&G would need to obtain a merits assessment by an independent barrister by 29 November 2016, otherwise the amount in escrow would be released back to Watchstone Group’s shareholders.
This week, S&G announced to the ASX, that it had obtained a positive merits based opinion and as such the £50 million currently held in escrow would continue to be held until the claim was resolved.[i] The opinion claims to have given the claim ‘a prospect of success and that, if successful, such a claim would be likely to have a value of £53m’.[ii] Although, Watchstone Group has said that the opinion is solely for the purpose of determining whether the warranty escrow may be released and does not pre-judge the outcome of any legal proceedings. It stated: ‘Watchstone remains satisfied that the warranty claim has no merit and will defend it robustly if proceedings are brought’. [iii]
However, shares in the AIM-listed firm, have fallen from £2.30 per share to £183.75 per share since September 2016 and it remains under investigation by the Serious Fraud Office. S&G, meanwhile, still face being sued in Australia by investors. We will continue to report on the progress of these claims.
[i] Michael Cross, ‘Slater and Gordon To Chase £53m Refund On Quindell’ (The Law Society Gazette 30 November 2016)< https://www.lawgazette.co.uk/practice/slater-and-gordon-to-chase-53m-refund-on-quindell-/5059007.article> accessed 1 December 2016.
[ii] Sarah Downey, ‘Slater and Gordon’s Battle Against Quindell Over Deal Has Merit, Independent Barrister Finds’ (Legal Business 30 November 2016)< http://www.legalbusiness.co.uk/index.php/lb-blog-view/8399-slater-and-gordon-s-battle-against-quindell-over-deal-has-merit-independent-barrister-finds> accessed 1 December 2016.
[iii] Ibid.